Freddie Mac has announced that they will no longer buy New York subprime mortgages:
Freddie Mac, the second-largest U.S. mortgage finance company, will stop buying subprime loans issued in New York state as a new law takes effect that holds investors accountable for mortgage fraud.
Freddie won’t buy loans dated on or after Sept. 1 that meet the state’s subprime definition, the McLean, Virginia-based company said today in a lender bulletin on its Web site. New York Governor David Paterson last week signed new foreclosure and lending laws that tighten legal protections for borrowers.
The story has been picked up – very briefly – by Calculated Risk and Naked Capitalism.
Sadly, nobody seems to want to delve into the legislation and the arguments that can be made; I don’t have a lot of information on this, so I won’t say much … but, at least to some extent, this is what I’ve been afraid of as a regulatory response: there are so many liabilities built into the system that the business is no longer worth doing. Maybe, in this particular case, this is a desirable result. As I said, I don’t have any details (if anybody has links to some informed discussion, they will be greatly appreciated!). But the regulators at all their levels are at great risk of throwing babies out with the bathwater.
PerpetualDiscounts had another good day, returning +0.42% to yield 6.18% dividends, equivalent to 8.65% interest at the 1.4x equivalency factor. With long corporates yielding 6.1% the pre-tax interest-equivalent spread is now 255bp. PerpetualDiscounts have now returned +7.63% since the July 16 nadir and the total return index has almost crawled back to July 2 levels.
| Note that these indices are experimental; the absolute and relative daily values are expected to change in the final version. In this version, index values are based at 1,000.0 on 2006-6-30 | |||||||
| Index | Mean Current Yield (at bid) | Mean YTW | Mean Average Trading Value | Mean Mod Dur (YTW) | Issues | Day’s Perf. | Index Value |
| Ratchet | N/A | N/A | N/A | N/A | 0 | N/A | N/A |
| Fixed-Floater | 4.64% | 4.37% | 58,343 | 16.43 | 7 | +0.0777% | 1,101.9 |
| Floater | 4.06% | 4.09% | 50,369 | 17.19 | 3 | +0.3652% | 909.5 |
| Op. Retract | 4.97% | 4.27% | 118,579 | 2.87 | 17 | +0.3285% | 1,046.9 |
| Split-Share | 5.33% | 5.92% | 57,277 | 4.45 | 14 | +0.3512% | 1,039.1 |
| Interest Bearing | 6.19% | 6.53% | 49,417 | 5.27 | 2 | +0.6672% | 1,131.2 |
| Perpetual-Premium | 6.17% | 6.07% | 69,460 | 2.25 | 1 | +0.1979% | 990.0 |
| Perpetual-Discount | 6.12% | 6.18% | 203,792 | 13.47 | 67 | +0.4180% | 867.8 |
| Major Price Changes | |||
| Issue | Index | Change | Notes |
| POW.PR.D | PerpetualDiscount | -1.2852% | Now with a pre-tax bid-YTW of 6.34% based on a bid of 19.97 and a limitMaturity. |
| PWF.PR.L | PerpetualDiscount | +1.0219% | Now with a pre-tax bid-YTW of 6.20% based on a bid of 20.76 and a limitMaturity. |
| SLF.PR.D | PerpetualDiscount | +1.1105% | Now with a pre-tax bid-YTW of 6.21% based on a bid of 18.21 and a limitMaturity. |
| BMO.PR.K | PerpetualDiscount | +1.1289% | Now with a pre-tax bid-YTW of 6.13% based on a bid of 21.50 and a limitMaturity. |
| TD.PR.Q | PerpetualDiscount | +1.1580% | Now with a pre-tax bid-YTW of 5.77% based on a bid of 24.46 and a limitMaturity. |
| PWF.PR.L | PerpetualDiscount | +1.1319% | Now with a pre-tax bid-YTW of 6.27% based on a bid of 20.55 and a limitMaturity. |
| RY.PR.W | PerpetualDiscount | +1.2739% | Now with a pre-tax bid-YTW of 5.96% based on a bid of 20.67 and a limitMaturity. |
| BNS.PR.J | PerpetualDiscount | +1.3146% | Now with a pre-tax bid-YTW of 5.69% based on a bid of 23.12 and a limitMaturity. |
| TRI.PR.B | Floater | +1.3333% | |
| TD.PR.P | PerpetualDiscount | +1.3614% | Now with a pre-tax bid-YTW of 5.73% based on a bid of 23.08 and a limitMaturity. |
| BMO.PR.H | PerpetualDiscount | +1.3953% | Now with a pre-tax bid-YTW of 6.09% based on a bid of 21.80 and a limitMaturity. |
| IGM.PR.A | OpRet | +1.4015% | Now with a pre-tax bid-YTW of 3.10% based on a bid of 26.77 and a call 2009-7-30 at 26.00. |
| BSD.PR.A | InterestBearing | +1.4553% | Asset coverage of 1.6+:1 as of August 8, according to Brookfield Funds. Now with a pre-tax bid-YTW of 6.69% (mostly as interest) based on a bid of 9.76 and a hardMaturity 2015-3-31 at 10.00. |
| LFE.PR.A | SplitShare | +1.4985% | Asset coverage of just under 2.2:1 as of July 31, according to the company. Now with a pre-tax bid-YTW of 4.89% based on a bid of 10.16 and a hardMaturity 2012-12-1 at 10.00. |
| NA.PR.L | PerpetualDiscount | +1.9200% | Now with a pre-tax bid-YTW of 6.39% based on a bid of 19.11 and a limitMaturity. |
| BNA.PR.B | SplitShare | +2.5304% | Asset coverage of 3.3+:1 as of July 31, according to the company. Now with a pre-tax bid-YTW of 8.61% based on a bid of 20.26 and a hardMaturity 2016-3-25 at 25.00. Compare with BNA.PR.A (5.95% to 2010-9-30) and BNA.PR.C (9.20% to 2019-1-10). |
| BAM.PR.I | OpRet | +3.4710% | Now with a pre-tax bid-YTW of 7.00% based on a bid of 23.55 and a softMaturity 2013-12-30 at 25.00. Compare with BAM.PR.H (6.32% to 2012-3-30), BAM.PR.J (6.18% to 2018-3-30) and BAM.PR.O (7.26% to 2013-6-30). |
| Volume Highlights | |||
| Issue | Index | Volume | Notes |
| CM.PR.H | PerpetualDiscount | 235,550 | Nesbitt crossed 15,000 at 18.00, then another 200,000 at the same price. Now with a pre-tax bid-YTW of 6.68% based on a bid of 18.18 and a limitMaturity. |
| SLF.PR.B | PerpetualDiscount | 77,602 | TD crossed 10,000 at 19.20, another 20,000 at the same price, then 19,100 at 19.21. CIBC crossed 11,800 at 19.21. Now with a pre-tax bid-YTW of 6.34% based on a bid of 19.25 and a limitMaturity. |
| NA.PR.K | PerpetualDiscount | 71,754 | Nesbitt crossed 55,000 at 23.50, then another 10,000 at the same price. Now with a pre-tax bid-YTW of 6.27% based on a bid of 23.46 and a limitMaturity. |
| SLF.PR.A | PerpetualDiscount | 56,350 | National crossed 40,400 at 19.00. Now with a pre-tax bid-YTW of 6.28% based on a bid of 19.21 and a limitMaturity. |
| PWF.PR.H | PerpetualDiscount | 29,850 | TD crossed 22,300 at 23.37. Now with a pre-tax bid-YTW of 6.25% based on a bid of 23.20 and a limitMaturity. |
There were eightteen other index-included $25-pv-equivalent issues trading over 10,000 shares today.